BEYOND BUDGET

Eid Mubarak! Taqabbalallahu Minna wa Minkum.
 

Assalamu alaikum wa Raḥmatullahi wa Barakatuh.
 

Last February, we were pleasantly greeted with the report that our budget deficit for fiscal year (FY) 2024 went down to 5.7 percent of our Gross Domestic Product (GDP), or ₱1.506 trillion. According to the Bureau of the Treasury's Cash Operations Report on the national government’s full-year fiscal performance for 2024, this is the lowest deficit recorded since the pandemic started in 2020.

For those unfamiliar with the term, a budget deficit occurs when we spend more than what we earn.

I believe the decline in the budget deficit is, in large part, due to the dynamic leadership of President Ferdinand R. Marcos Jr. (PBBM).  In his 2024 Budget Message, the President urged, "For the next five years, we must do more, building on all the gains that we have made—through the whole-of-government and whole-of-society approach. We need this not only to be effective but to be transformative." 

It is also the result of the strategic management efforts of the Philippine Economic Team, who have been at the forefront of ensuring that the macroeconomic targets of our administration are met.

Fiscal consolidation on track
 

It may be recalled that the FY 2023 deficit was 6.2 percent of GDP, or ₱1.512 trillion. The narrower fiscal gap for the year, vis-à-vis the 7.3 percent budget deficit in 2022, was attributed to the 7.86 percent increase in revenue collection, surpassing the 3.42 percent growth in government spending, indicating progress in fiscal consolidation. 

For FY 2024, the further narrowing of the budget deficit by ₱5.7 billion (0.38 percent) year-over-year (YoY) was the result of the robust 15.56 percent growth in revenues, which outpaced the 11.04 percent rise in expenditures. The slight variance from the ₱1.484 trillion deficit program was primarily due to a higher outturn in government spending, including those charged to unprogrammed appropriation, as well as the defrayment of accounts payables.  Nonetheless, given the better-than-expected revenue and spending performance, the decline in budget deficit to 5.7 percent for 2024 is a marked improvement compared to the 6.2 percent deficit recorded in 2023.  

We, the country's economic managers, are glad of this development, as it is within our fiscal outlook at the Development Budget Coordination Committee (DBCC). During our meeting on Dec. 2, 2024 to revisit the government’s medium-term macroeconomic assumptions and fiscal targets, we determined that the budget deficit might reach 5.7 percent of GDP. 

Under our Medium-Term Fiscal Framework, we are targeting to further narrow the government's budget deficit-to-GDP ratio of 3.7 percent,  reach our economic targets of six to eight percent GDP, achieve upper-middle-income status, and bring down poverty rate to single digit by the end of PBBM's term in 2028.

Effective government spending and revenue generation
 

We, in the Department of Budget and Management (DBM), believe that the decline in our budget deficit augurs well with our fiscal performance targets. The narrower budget gap underscores the effectiveness of DBM's efforts to optimize the different national government agencies’ budget utilization. 
Government spending rose by 11.04 percent compared to the previous year, surpassing the target by 2.97 percent. This was driven primarily by the prudent allocation of funds to accelerate the implementation of various priority health and social protection programs, increased salaries for qualified government employees, and strong infrastructure and other capital outlays of the Department of Public Works and Highways, among others. 

Meanwhile, government revenues for 2024 reached ₱4.419 trillion or 16.72 percent of GDP, higher by 15.56 percent compared to 2023. This also exceeded the government’s revenue target by 3.49 percent, allowing for greater fiscal consolidation. Thus, we laud our revenue agencies for this notable improvement.

Impact on our Bagong Pilipinas
 

This performance reaffirms that we are on track with our Agenda for Prosperity.  The impact of declining deficit can be seen in the benefits that our citizens enjoy, including increased employment opportunities, a lower inflation rate—which was at 2.1 percent last February —that adds relative value to their money, government providing more infrastructure projects, better social welfare programs and public services, as well as more and higher-quality jobs due to more foreign investments coming in, and the expansion of micro, small, and medium enterprises because of stable economic conditions. 
Furthermore, I believe that it solidifies the Philippines’ position as one of the dynamic emerging economies in the Asia-Pacific region. 

Beyond budget, more than a triumph of the PBBM administration, the declining budget deficit is a victory for the people. Rest assured that we, the economic managers, remain committed to achieving growth-enhancing fiscal consolidation while prioritizing long-term investments in key sectors such as infrastructure, education, and healthcare to sustain our economic recovery and stimulate growth. Through these efforts, we will continue to build a Bagong Pilipinas that fosters job creation, increases incomes, and reduces poverty. Together, let us stay on track toward an inclusive and sustainable economic transformation.

(Amenah F. Pangandaman is the Secretary of the Department of Budget and Management.)